VA Credit Requirements
VA Loan Credit and Financial Eligibility Overview
Below is a concise overview of the financial eligibility requirements for VA loans, including credit score, debt-to-income ratio, payment history, and more. It covers the impact of bankruptcy, foreclosure, delinquent loans, and the significance of overall credit performance. Key distinctions such as DTI versus residual income are highlighted, offering a clear guide for veterans navigating the VA loan process.
| Eligibility Criteria | General VA Home Loan Credit Guidelines |
| Credit Score | No universal minimum set by the VA. Lenders however can have a minimum credit score requirement. |
| Debt-to-Income Ratio (DTI) | The VA primarily focuses on the Residual Income available. There is not a set minimum DTI requirement however lenders can set this requirement. |
| Payment History | No more than one 30-day late payment in the past 12 months, ideally. Exceptions can be made based on individual circumstances. |
| Loan Entitlement | Sufficient entitlement is required. Veterans must have enough remaining entitlement or restored entitlement for additional VA loans. |
| Residual Income | Must meet the VA’s residual income guidelines, which vary by family size and region. |
| Bankruptcy (Chapter 7) | Typically, you must wait two years from the date of discharge before qualifying for a VA loan. Exceptions can be made for those who have rebuilt credit and have a clear explanation for the bankruptcy. |
| Bankruptcy (Chapter 13) | You may qualify after making 12 months of payments on time and with the bankruptcy trustee’s approval. |
| Foreclosure | A two-year waiting period is generally required after a foreclosure before being eligible for a VA loan. However, the period can be shorter if there are mitigating circumstances. |
| Short Sale | The VA does not mandate a specific waiting period for a short sale, but lenders might have their own requirements. Generally, if there are no late mortgage payments leading up to the short sale, immediate VA loan eligibility is possible. |
| Student Loans | Student loans in repayment or scheduled to begin within 12 months of the loan application must be considered in the DTI calculation. Deferred loans may also require a calculation of potential payments. |
| Child Support & Alimony Payments in Arrears | Outstanding child support and/or alimony obligations are considered in the DTI ratio and overall credit evaluation. Late payments or arrears can negatively impact credit history and loan eligibility. |
| Judgments | All judgments must typically be paid in full or have a satisfactory payment plan in place before closing a VA loan. Outstanding judgments can negatively affect credit and loan approval. |
| Mortgage Payment History | A history of timely mortgage payments is crucial. Late payments on a current mortgage can severely impact eligibility. Lenders generally require a clean payment history for at least the past 12 months. |
| VA Loan Indebtedness | Veterans with active VA loans or previously used VA loan entitlement must show sufficient remaining entitlement for additional loans or have their entitlement restored. Conditions for restoration depend on repayment of the prior loan and the disposition of the property secured. |
| Delinquent Government Loans | Veterans with delinquent debt on other government-backed loans may face challenges in obtaining a VA loan. Resolution of the delinquency or a satisfactory payment arrangement must typically be documented before loan approval. |
| Overall Credit Performance | Lenders evaluate a veteran’s overall credit performance in the past 12-24 months to assess financial stability and risk. This includes looking at payment timeliness, credit utilization, and how new credit accounts have been managed. |
From Shirley:
“If you’re concerned that your credit history might prevent you from qualifying, I encourage you to explore how you can still qualify. Remember, there’s always a strategy we can develop together to enable you to purchase a home using the benefits you’ve earnestly earned. You have the option to submit your application without a hard credit inquiry (only a soft pull), ensuring it won’t impact your credit score at all. Once I receive your application, I’ll reach out to you with a concrete plan on how to proceed towards purchasing a home.
The great news is that the lender I work for doesn’t impose VA overlays on credit scores for a VA purchase, meaning there’s no minimum credit score requirement. We adhere strictly to the VA guidelines to help get you approved. So, let’s work together to make your dream of homeownership a reality, honoring the benefits you deserve.”
